Suppliers tackle Coles and Woolworths

Mark Hawthorne and Colin Kruger
March 6, 2012
The Age

SUPPLIERS to Australia’s two dominant supermarket chains have approached the consumer watchdog to complain about the behaviour of Coles and Woolworths.

Rod Sims, head of the Australian Competition and Consumer Commission, has revealed that his recent call for information about the alleged bullying tactics of the supermarket giants had yielded a number of contacts.

Mr Sims last month promised to protect any supplier who complained about Coles or Woolworths, which together control more than 70 per cent of Australia’s grocery spending.

He made the call after claims that some suppliers were being squeezed as a result of the price wars between Coles and Woolworths over fruit and vegetables, milk, bread and other fresh produce, toilet paper and washing powder.

Some suppliers have, in private, claimed the supermarket chains encouraged them to invest in infrastructure to meet demand, and then asked for further discounts once they had borrowed to fund expansion.

The complainants have ranged from small produce suppliers to multinational companies.

Mr Sims told The Age that a number of ”major listed companies” were among those who had responded to his call for evidence of ”unconscionable conduct” by the supermarket giants.

”We are encouraged by the responses we have had so far,” he said.

At the time of his call for information, Mr Sims cited a 2008 inquiry that did ”not support the proposition that retail prices have risen while farm gate prices have stagnated or declined”. Since then, however, supermarkets have increased their use of generic-label foods and have been accused of squeezing out branded goods and cutting producers’ margins.

Late last year Woolworths announced plans to double own-brand sales over the next five years. Goldman Sachs analysts estimate this will shift around $4.5 billion of sales to own-brand products.

The liquor industry is the latest to feel the squeeze. Woolworths said last week that its house-alcohol sales – including beer, wine and spirits – were now equivalent to the second-largest supplier to its liquor division by value.

Last year, private-label wines were the biggest growth area in Woolworths’ liquor business. At the time, family-run winery De Bortoli complained there was less shelf space for its brands as private label wines expanded.

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